Retailers Explore Options for Fighting Retail Crime

Retailers have an array of options for dealing with loss prevention.

The National Retail Federation said organized retail crime costs the industry $30 billion a year. And in a recent survey of its members, 97 percent said they had been a victim of ORC.

While technology and video surveillance can help manage and secure inventory as well as thwart crime, recovery of lost goods and money is still problematic.

Stuart Levine, founder, president and chief executive officer of The Zellman Group, helps retailers and fashion brands pursue “civil recovery,” which he describes as a company’s “right to pursue civil damages or penalties under state statutes for theft.”

The process includes cases involving shoplifting and employee theft as well as “court-ordered restitution” of goods. Levine explained that when products are stolen, they go into police custody and are later auctioned off. If a brand or retailer doesn’t pursue civil recovery, the money is lost. The Zellman Group can also offer point of sale data analysis to help identify fraud.

But preventive measures are also needed. On that front, solutions include RFID and video security as well as other technologies.

Video cameras can provide a variety of services, from heat mapping to traffic counting and even facial recognition. Facial recognition software can identify a known offender and alert the loss prevention executives when that person enters the store.

Video cameras can also help a store determine if a customer is physically entering a department that might not be staffed adequately, which could put high-priced inventory at risk. Traffic counting allows managers to shift employees around the floor and remove the guesswork as to where to place them. Plus, as employees get more expensive, the ability to make them more efficient is a bonus.

The introduction of e-commerce to the physical stores has also opened a new can of crime worms. Between in-store fulfillments of online orders, “Buy Online, Pickup in Store,” known as BOPUS, and return fraud, loss prevention executives are being forced to confront new forms of inventory loss.

Sending cashiers to back-office areas to fulfill online orders has created the opportunity for unpaid items to get boxed up and go undetected as they leave the store. There are two ways to combat this problem. One is to install nimble cameras whose location can be changed without the associates being notified. These semipermanent installations allow managers to do more with less and keep employees on the right side of the law.

Another is a smart scale that will know how much the box should weigh versus what has been rung up for the package. It’s similar to self-checkout stations at many grocery stores. The bagging area knows how much weight to expect for the item that has been rung up.

BOPUS is causing store managers to set aside locations in the store. Hedgie Bartol, business development manager for retail at Axis Communications, said new procedures are being written and, since it is so new, the solutions are developing.

Return fraud accounts for 5.5 percent of all returns and is a much trickier problem to solve. Stores are confronted with criminals who return items that might be in the physical store but can be purchased online.

This is where RFID tagging can help prevent a crime. These tags not only help a manager track inventory, but can also quickly tell an associate whether in fact the item came from the company’s online inventory and whether it is associated with a sale.

Avery Dennison makes tags that have brand protection features. “These tags can prevent counterfeit return fraud,” said Francisco Melo, vice president of global RFID at Avery Dennison. “The tags can ensure the product came from a genuine sale and is an authentic product.” This keeps counterfeiters from trying to return fake products to the store.

The RFID tags are also helpful when it comes to organized retail criminals that steal trucks. These thieves target trucks that they know are carrying high-value items that they can resell within their crime network. If the thief tries to engage in return fraud, the RFID tags alert the retailer.

Aside from loss prevention, the use of RFID is also playing an important role as retailers expand their omnichannel retailing strategies. And interest in adopting the technology is gaining acceptance, said Mark Roberti, founder and editor of RFID Journal.

Roberti said as more retailers adopt it, “more of their competitors are realizing they are behind and need to catch up. So each time one new retailer announces it is using RFID in its stores, it spurs several others to start looking at the technology more seriously.

“Adoption is thus gathering momentum,” Roberti added. “Barring any serious downturn in the economy, I would expect that adoption in retail will continue to accelerate and then we’ll reach a tipping point and it will explode.”

RFID Journal is holding an RFID in Retail and Apparel conference on Oct. 6 in New York to share best practices and hear from companies that are reaping the benefits of the technology.

Regarding other security measures, retailers are also finding that visible deterrents work well. One growing loss prevention category that is seemingly a step backward is uniformed guards. Retailers using uniformed guards increased 7.1 percent in 2015, while undercover detectives in stores dropped 14.5 percent. They are also increasing the use of live customer-visible video cameras, with that category growing by 7.5 percent in 2015.

One thing that isn’t changing is that inventory shrinkage will always be a problem and retailers will have to continually sharpen their tools in this game of cops and robbers.